Financial managers are faed with important decisions. What decisions can be catorgied as short term? Long term? With any decision, what shoud be the utimate goal? How can this goal be accomplished given current financial market conditions?
Solution
Answer: Financial Decisions or Finance Functions are closely inter-connected. All decisions mostly involve finance. When a decision involves finance, it is a financial decision in a business firm. In all the following financial areas of decision-making, the role of finance manager is vital. We can classify the finance functions or financial decisions into four major groups:
(A) Investment Decision or Long-term Asset mix decision
(B) Finance Decision or Capital mix decision
(C) Liquidity Decision or Short-term asset mix decision
(D) Dividend Decision or Profit allocation decision
The ultimate goal of any financial manager (as well as the firm) is the maximization of shareholders’ wealth. A good financial manager therefore should carefully consider and weigh the risk of undertaking a certain project against the profits associated with undertaking such a project. Capital Budgeting techniques enable the manager to make such decisions.
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Financial managers are faed with important decisions- What decisions c.docx
1. Financial managers are faed with important decisions. What decisions can be catorgied as short
term? Long term? With any decision, what shoud be the utimate goal? How can this goal be
accomplished given current financial market conditions?
Solution
Answer: Financial Decisions or Finance Functions are closely inter-connected. All decisions
mostly involve finance. When a decision involves finance, it is a financial decision in a business
firm. In all the following financial areas of decision-making, the role of finance manager is vital.
We can classify the finance functions or financial decisions into four major groups:
(A) Investment Decision or Long-term Asset mix decision
(B) Finance Decision or Capital mix decision
(C) Liquidity Decision or Short-term asset mix decision
(D) Dividend Decision or Profit allocation decision
The ultimate goal of any financial manager (as well as the firm) is the maximization of
shareholders’ wealth. A good financial manager therefore should carefully consider and
weigh the risk of undertaking a certain project against the profits associated with undertaking
such a project. Capital Budgeting techniques enable the manager to make such decisions.
